patrick.net

Ditto in East Bay - Alameda & Contra Costa approaching 8800 active listings.

Ditto in south bay in general too. 400K - 500K places used to be hot cakes but now they are getting stale. The low end is getting squeezed by the rate hikes.

Mountain View and Palo Alto appear to be holding up for now, although they are still softer than last spring.

I just checked the rates. A jumbo 30YR FRM with 20% down and 0 point is now near or above 6.5%. It seems that it is no longer possible to do 100% financing cheaply any more.

Many people are still saying that interest rate is at historical low. They fail to understand that a "small" increase from 6% to 6.6% is a 10% interest payment hike.

I am not surprised that Voodoo-financing-dependent low-end units are getting pressured recently.

And my Realtor friend said that some of her entry level clients are being offered loans at 7.5 to 8%. I am assuming these are fixed.

Sounds about right, even for people with very good credit, if the downpayment is small.

SJ_Jim

Here's the scoop on Sacramento metro area inventory:

http://sacramentohousingbubble.blogspot.com/

Not sure if I marked this as a link, or even if that's allowed.

I can't vouch for his numbers but this guy obviously puts work into his page. The recent top was 12,000+ on or about Nov.15. It's getting close again as of 4/5/06.

Is there anything like this kind of hard data for the BA? Our opinions are all interesting, sure. But opinions are like a**holes, everybody has one.

BTW, this Sacto blog has many topical articles, and the commentary is well written. The focus is obvious:

http://www.sacramentolanding.blogspot.com/

He also lists lots of related links.

If posting these links is taboo please let me know. I'm not trying to step on anyone's toes. I gather that Patrick is not in a competitive mode here.

I find that amazing, in itself. What is he, like the Linus Torvalds of the Bubble or something?

HARM
Yes, I hired a real estate attorney on the second house I ever bought. I bought from owner, negotiated the price myself(It was about 50K below market.)and hired an attorney to do the contract. Escrow does the rest...as far as telling you what papers need to be in by when. Between an attorney and a good escrow agent, there is little need for the realtor.

When I first came to the US, I took Greyhound all the time to go between cities. The fun part of this was, I got to meet people I never interacted with later on in my life, but their lives, their existence always stayed with me all these years, and I often wonder what will happen to the US if this ignored mass of silence became deeply affected by the burst of the bubble.

Now we are setting our eyes on the nice enclaves of Pac Heights, West Valley, chatting away with local issues and perhaps planning away with trading up a step closer to our dream property when this all unfolds. But at the back of my mind, I somehow wonder if I want to up my exposure of fixed asset in this country when all the time bombs go off.

The fact is, lots of Americans are not living a good life, certainly our definition of a good life. America is a far safer place than it should be because the silent masses are still able to get by, although their living space will be increasingly squeezed in the coming years. I was actually shocked by the poverty I encountered here coming from Asia, and having toured around some of Asia's poorest countries, the bottom strata in America is not living a much better life compared to poor Asians, the former living in urban waste, and the latter living in nature, somehow a better option if I have to choose between the two.

I am not convinced that we are free from the possiblity of social upheaval in this country. We are just a step away from it, just that we managed to miraculously stay off due to our disproportional control of the world's resources. If we lose our grip on the resources, I am not sure what will happen. We are already becoming a very divisive country, the red vs. the blue, the illegals vs the legals, the religious vs. the liberal, and such division has gotten more intense lately, while I can only see it intensifying going forward. If the bottom of the food chain in this country starts to boil, I am afraid housnig bubble may be the last thing on our list of worries.

Michael Holliday Says: April 6th, 2006 at 2:12 pm
I’m thinking maybe buying the worst house on the best street, fixing it up, and settle for a few grand profit, i.e. $10-$20K a pop.
Do one every two months wouldn’t be too bad, no?
Think it’s doable in a sinking/sunk market?

Just be careful with this: if it takes you 6 months to buy, renovate and sell, you could find that if the market tanks in the duration, you will be selling for a loss, even with the renovations, or at least not make it worth your while for the labour you've expended and risks you've taken. I've got a friend who does that here, but when the market goes soft, it's harder to find a buyer, people make lowball offers even if it's a really good reno. You could end up getting offers $50K less than you bought it for after renovations... Unless you buy really well, and get the run-down place cheaply and you're confident... There may be ways of making over timber frame houses in the US which add much more value, all the stuff here is brick, so there's not much you can do with the exterior :(

Owneroccupier Says:
Apart from energy (oil, ng, uranium, etc.), and gold, silver, what other real assets are good for hoarding? How does one hoard agricultural products, esp soy and sugar? Any suggestions?

if you hoard uranium at home, better put some orange police warning tape around it and keep a geiger counter handy - and try not to let the kids play too close...
some of the organic products will go past their use by dates...
how is 'energy' a real asset? not very tangible... :P

hey astrid,

i've just been talking to the housing policy adviser to the state Greens, who have a few people in parliament, and she's broadly in agreement on my nationalisation scheme, heh... it turns out they have a few policy documents pretty well in line with a lot of my proposals for programs - a senator did a great speech on it recently. the 'labor' party in power, on the other hand, sold out long ago, they're a bunch of crypto-fascists in bed with investment banks and developers, and so it's an uphill battle - election is about 1 year away, and labor are on the ropes cos they are unpopular, been resting on their laurels, infrastructure is run down, etc etc... i'm hoping to get some small party people in on the affordability platform by publicising it heavily as an issue, which means getting the skates on...

Sean
I like how you put smiley faces on the end of your sentences! :)

Owneroccupier Says:
The fact is, lots of Americans are not living a good life, certainly our definition of a good life. I was actually shocked by the poverty I encountered here coming from Asia, and having toured around some of Asia’s poorest countries, the bottom strata in America is not living a much better life compared to poor Asians, the former living in urban waste, and the latter living in nature, somehow a better option if I have to choose between the two.

heey! don't tell paul chua that, america is the best country in the world with the best values in the world, and when president bush says 'invade!' you'd better believe it's the best thing you can do, to avoid clear and imminent threats to the American way of life...

a friend of mine just came back from LA, said he was amazed at the visible homeless rate, even compared with sydney, which has a certain amount of visible homelessness... so it sounds more like places in eastern europe like hungary i've visited, with homeless people holed up in the subways, etc...

if only superman were here to help us [sigh]

Energy is a real asset because it is not a derivative or a virtual asset. It does happen to be a consumable asset, not a durable asset though.

Linda in LA-LA-LAND Says:
Sean
I like how you put smiley faces on the end of your sentences

the student has exceeded the master :!: :D 8) ;) :mrgreen: :lol:

The mystery revealed.

:twisted:

Different Sean,

I know Australia fairly well since my parents lived in Sydney and are now retiring in Queensland. You can't even compare Sydney's poverty to what we have here, striking. Redfern or Paramatta are heaven compared to Oakland (and Oakland is already heaven compared to a lot other places), there are lots of pockets here I don't dare to drive by any more. When I was younger, fearless and had nothing to lose, I wandered around these ghettos often thinking how did America get by with all these people living in such miserable conditions?

Australia is a much better place than the US, the only thing I dislike about you guys is the tax rate.

It does happen to be a consumable asset, not a durable asset though.

i'm kidding, really. the energy resource is tangible, e.g. oil, coal altho you wonder about hydro-power. further, i assume 'energy' or energy as a resource is classed as an asset for accounting/trading purposes.

i also presume O-O isn't going to hoard uranium at home? altho it might keep down cockroaches, hmmm...

surprisingly, all kinds of energy can be stored by very real atoms

yes, altho the 'solidity' of atoms is an illusion - they themselves are just bundles of energy in turn... 'energy' like heat energy is just energy transmitted in the infrared spectrum causing further excitation of molecules; electrical energy is a movement of electrons down a wire due to electrical charge attraction; etc; so it's all either E-M radiation or electrical charge effects! :idea:

if only i'd focused on business studies instead of science in my misspent youth! :cry:

yeah, true, sydney has a big visible homeless problem in the inner city because the weather is mild year round, and they like sunning themselves in the street, and they can sleep in alleys without getting chilled...

unfortunately, they tend to be the deinstitutionalised mentally ill, there's moves afoot to reinstitutionalise or otherwise do something...

You can’t even compare Sydney’s poverty to what we have here, striking.

so there! and redfern is only a problem for cultural reasons - they're trying to gentrify it in a big way right now with the Redfern-Waterloo Authority.

i think my earlier references to US 'fatalism and individualism' are fairly valid...

i think it's just lesser extremes of rich and poor in australia, partly due to a strong union movement and a wage setting social contract that makes wage differentials flatter. most lawyers here make $50K a year, and are lucky to get the work! doctors make $70-80K after overheads! a lot of tradesmen are now pulling $100K+

but i don't think tax is that bad, it's highly comparable to US, especially since income tax here is only pulled by the Feds, no state income taxes. it's classed as a '30% taxing country', altho the top rate is about 48%. compare it to sweden etc where it's more like 60%... obviously HK is a flat 15%, but they don't have a welfare system either...

it’s stuff inside the atom that is insubstantial, atoms themselves are fairly hard to break units. I do know light can be energy or particle. Have I restored my credibility?

not really, but i'm a bit rusty myself.

you're right in what you say at a HS physics level... atoms definitely are hard to break, because nucleii are bound by things like the 'strong' force, and electrons are held by 'electrical' force. but they've 'discovered' that subatomic units like protons, neutrons, electrons, i suppose quarks, etc, are all just bundles of energy in themselves. the solidity of anything is an illusion, in that regard. electrons are really just energy waves in 'orbital' levels, they are not like hard little peas.

the fact that electrons are relatively easy to remove from nucleii and move around is the basis of the entire branch of all chemistry, and i suppose biology in turn. also in electricity generation...

'splitting the atom' is possible, and releases huge amounts of energy (nuclear fission). fusing nucleii can also liberate huge amounts of energy = nuclear fusion, which is how the sun works, and how all the matter in the universe was created.

etc.

Sean & Randy:

Thanks for the advice on buying low, selling high.

I will remember those words.

_________________________________

"...a qualified and honest real estate broker may be worth the 'investment' in his fee."

Surfer-X says, in response:

"In california the person you mention is currently in the Bahamas with Santa Claus, Elvis, Jimmy Hoffa, The Easter Bunny, and……. Jim Morrison."

You forgot Bruce Lee.

I meant atoms are solid compared to quarks

heh, digging a deeper hole... they're all just energy waves... quick, go browse wikipedia! don't post anything!

remember, these things are pretty tiny, the very conception of 'solidity' doesn't mean anything at that level, when they are all bound together they make a block of metal, or a desk, or whatever, but they are really only 'force fields' of energy in fact. the quarks are more than just probabilities, they're a bunch of energy; the concept of 'electron orbitals' got revised to suggest the 'average energy' of an electron meant there was a probability it could be 'found' in a certain orbital. etc. but HS teaching is still influenced by the early models of 'plums in a plum pudding' theory somewhat - early theorists could only think in terms of the solids that they knew...

DS,

HK has an excellent welfare system, much better than the US. A household of 4 with no jobs will rake in more than the equivalent here, and medicare coverage is 100% with almost nothing out of your own pocket.

Where does the government get its money? All land is owned by the government and auctioned off for lease from 99-999 years, which accounts for more than half of the government's income on a good year. And of course HK doesn't have to maintain a huge overseas military base either.

For comparable income, Australia's tax is way higher than the US. You guys don't have the home mortgage interest deduction, capital gains tax is lumped in with the income tax unlike for us, is capped at 15%.

Then comes the moment where the realtor really, really needs the sale and says something like, “you know this really isn’t a bad offer” and then they can go through line item by line item on all of the concessions you’ve made as a buyer......Remember, make nice.

DinOR,
Your posts are just fantastic. I've learned a lot from you. But I realized that when I read them my mind narrates your words in the voice of the Geico Gekko. No offense intended, just struck me as funny.

DinOR is the genius behind the Geico Gekko.

Thanks to astrid, FormerAptBroker & Linda in LA-LA-LAND for responding to my Q about using a RE attorney vs. RE buyer's agent.

@FormerAptBroker & Linda in LA-LA-LAND:

I noticed that you both recommended using RE attorneys for investment properties, and have both personally used this approach in the past. Would you still recommend this strategy for a FTB buying his first house as a primary residence?

Keep in mind that --after all is said and done-- I am still just a greenhorn JBR and don't have any direct prior experience in the transaction process itself (though I've observed others, read religiously, and learned a great deal from you fine folks :-) ). I'm wondering if there isn't something of value that a (Surfer-X please cover ears) "qualified and honest buyer's agent" might be able to offer a greehorn FTB. Think George, or 'Deb' from Ben's blog. There have to be some decent people employed as agents out there, right....? Anyone, anyone....? Bueller....?

By the way you all, I'm going to be at Mijita in the Ferry Building in San Francisco on Sunday at 5:00pm. Anyone else who wants to show up and talk housing is welcome.

Patrick

HK has an excellent welfare system, much better than the US. A household of 4 with no jobs will rake in more than the equivalent here, and medicare coverage is 100% with almost nothing out of your own pocket.

I didn't know that. My sister and brother-in-law have lived in HK for 4-5 years now, and they've always told me that welfare is meant to be miserable, especially for housing if you have no family supports, etc. But they make good money as expats and don't need to worry about it enough to find out. Fair enough about the land auctions, (altho housing's very expensive), no military, etc. I believe land prices there are thru the roof, my sister has a 3 br place on the 20th floor of some high rise in an expat area, and that is supposed to be the 'HK dream' for most people - but they get a huge subsidy from Tim's employer. Many of the 'locals' don't have real furnishings in their living rooms, just a table with a PC on it - Kath lived in Happy Valley for a while and people in the building across the way used to just stare into the living room in fascination, heh.

For comparable income, Australia’s tax is way higher than the US. You guys don’t have the home mortgage interest deduction, capital gains tax is lumped in with the income tax unlike for us, is capped at 15%.

I really question this 'way higher tax' thing. Australia is a relatively low-taxing country, and every comparison I've seen pegs it down near US levels, and there are plenty of higher taxing countries in the OECD. You get the money back through redistributions too, 'middle class welfare' like family allowances, baby bonuses, free healthcare, almost free university tuition, etc.

You're right, there is no home mortgage deduction, the UK had it for a while and took it back off. I'd be concerned introducing it would feed into housing inflation all over again, and I would oppose it with politicians if they suggested it if there were no caps on pricing introduced at the same time - the realtors would just see it as another cash cow to milk. Altho investors can claim mortgage interest as a deductible expense, which is not that healthy either, as the Tax Office is subsidising landlords out of taxpayers money! Capital gains tax was recently halved on the sale of investment properties, but there is no CGT to pay on principal place of residence anyhow. Halving the CGT was also seen as regressive and undesirable in that it also rewarded specuvestors and encouraged more flipping, etc. CGT amounts make a miniscule difference to taxation rates, how many people are liable for CGT as a % of the taxpaying whole anyhow? Very very few. Not many people are avidly trading investment properties for capital gain, nor even shares. There is also a national 10% flat GST on goods and services, which replaced the wholesale sales tax system.

I think you'll find the tax regime is highly comparable in magnitude to the US, with a few subtle differences in detail. e.g. the states here collect neither income tax nor GST, it's all collected federally and then handed back to the states as grants, tho they still have a few things like petrol, tobacco and gambling excises...

HARM
A decent buyer's agent? My husband knew our agent for 30 years and I still think he was just trying to close the deal. Yes, he's a good guy, but bottom line. he's trying to put his daughter through college. He played hoops with my hub when they were teens...I don't think he outright lied to us...but he sure became friendly with the buyer...if fact that same buyer is selling that house through our agent today.
To purchase, you're better off using the sellers realtor...then they'll get double commision and REALLY push your bid...$$$ motivation. At least then you KNOW they don't have your best interest in mind...instead of deluding yourself ...as I did.

HARM Says:
"@FormerAptBroker & Linda in LA-LA-LAND: I noticed that you both recommended using RE attorneys for investment properties, and have both personally used this approach in the past. Would you still recommend this strategy for a FTB buying his first house as a primary residence? Keep in mind that –after all is said and done– I am still just a greenhorn JBR and don’t have any direct prior experience in the transaction process itself (though I’ve observed others, read religiously, and learned a great deal from you fine folks ). I’m wondering if there isn’t something of value that a (Surfer-X please cover ears) “qualified and honest buyer’s agent” might be able to offer a greehorn FTB. Think George, or ‘Deb’ from Ben’s blog. There have to be some decent people employed as agents out there, right….? Anyone, anyone….? Bueller….? "

There are "some" good people out there working as realtors, but if you want to actually "buy" a home you should try and work with a listing agent (since unlike all the other buyers working with other agents the listing agent will want you to buy the house). Your best bet as a first time buyer is to find a real estate agent who will set you up with internet access to the MLS then do your own home searching and make a deal with the listing agent of a home you like. Most residential deals are done on standard California Association of Realtors (CAR) forms and you really don't need a real estate attorney.

Michael Holliday Says: April 6th, 2006 at 8:05 pm
Thanks for the advice on buying low, selling high.

Just remember to spreadsheet all your costs realistically, also. Don't forget the costs of transfer, which can be high, say, 10-12% of purchase price, which will cut into any profit you hope to make straight up. Sometimes you can do private sales entering and exiting, etc, thus cutting out realtor commissions altogether, and advertise it yourself for less. Don't forget the cost of servicing the mortgage while you're in possession, particularly interest, obviously, property taxes, etc. Choose the finance product that suits you for the job, such as an interest-only ARM loan - why touch the principal or pay any more interest than the bare minimum if you're going to on-sell? Allow for disasters, cost overruns, and the time the finished property will be on the market, which could be weeks or months. Get a full, quality inspection done before purchasing so there won't be any nasty structural surprises. Think about the capital gains tax and other implications of being the nominal owner-occupier vs doing it as a business - altho if you do it several times a year and it is a significant source of income, the IRS will class it as a profit-making business and treat the sales proceeds as income, not as capital gain. I've heard it's not necessarily wise to create a company to purchase and do the work under, it can be an expensive waste of time - don't listen to spruikers carrying on about 'asset protection' or tax benefits under complex company-trust schemes, they're just selling you a pup, when you look at onerous annual reporting requirements, etc.

There are 'rehabbing get-rich-quick' courses and books out there also. Some of them probably offer realistic advice... Don't pay $5,000 to some spruiker tho... have a look at books at http://www.johntreed.com, he lives and works in CA area - he seems legit with sensible, affordable advice, and can tell you intimately about CA conditions. (trust me, i get no kickbacks, when you see how john reed operates.) he also gives advice, such as: if you're not comfortable dealing with and risking large sums of money, don't do it. if you are not very handy, don't do it. choose a niche that suits you best, e.g. if you are very into finance and legals in property, try to do something there rather than rehabbing.

Having said all that, you can potentially still make money out of it, some people do better by doing small-scale new development as infill instead of renovating, at a higher density, council zoning permitting. Also, you can find yourself in a bidding competition with ambitious builders, small-scale developers, and people who have just completed one of the abovementioned get-rich-quick courses...

Newsfreak
Back in 2003 it was a different market and yes it sounds like in your situation the buyers agent was working for the buyer. However, a lot more'bargain hunters' seem to have crawled out of the woodwork....and if you are looking to close a bargain deal in a declining market, you need the perfect combination of elements as both DinOr and George pointed out. You need a buyer that CAN actually sell for a lowball price, the house has been sitting on the market with no action, a desperate realtor that NEEDS the sale,significant cash in hand, and some good strategies to close the deal. Often houses that are FSBO are overpriced so negotiating with an owner would be rare. Foreclosure buying is a science with many pitfalls and that market can be full of hawkers and bargain hunters also. I truly believe the best scenario for closing that deal is to get the sellers realtor in your pocket. This does have to be disclosed to the seller, but that realtor can offer the seller a kick back of part of their commision. If you are going to try FSBO then having an atty draw up your contract is invaluable. Mine made a loophole so I could get out of the deal if I got cold feet..the seller didn't catch it when he signed.
In closing, what I'm trying to say is that in the long run, the atty ,in my experience, can be less expensive in the long run AND you KNOW he's on your side, unlike some random,lying, untrustworthy, realtor. :P